10 ways students can build good credit

There are tricks and techniques, but it boils down to being responsible

One of the most exciting
parts of growing up is becoming financially independent, but learning how to do
so can be challenging. Building good credit is a must: It will help you qualify
for loans, auto insurance, rental applications, cell phone plans and can even affect
whether you get a job.

How do you get started? The Credit CARD Act, most of which took effect in
2010, changed the rules of the game. However, put simply, it still all comes
down to being responsible.

CreditCards.com asked
several financial experts to explain how students can effectively build good
credit. Here's what they recommend:

1. Become an authorized user on your parents' account.

"I always advise
parents when the student is going off to college, unless you're 100 percent
sure they're responsible, the first credit card that student should have is
yours," says Mike Sullivan, former director of education
for Take Charge America, a Phoenix-based nonprofit financial education and
consumer debt service organization.

The teen should be an authorized user on the parent's account so the adult
can monitor the child's spending.

Additionally, this can help the student build
good credit via "piggybacking," a controversial practice that FICO-- creator of the widely used credit score that bears its name -- continues to permit
among family members.

In piggybacking, a parent makes a child an authorized
user. If the parent has good credit, the child's credit gets a boost.

While becoming an
authorized user has long been a popular choice for students aiming to build
good credit, for some it may now be the only choice. In the wake of the Credit
CARD Act, people under the age of 21 now must have a co-signer or show proof of
independent income if they want to get approved for a card in their own name.

In short, that means that if you can't prove to the issuer that you have the
means to pay your balances, you probably won't get a card.

2. Open up your own credit card.

If you can provide proof
of income, it may be time to apply for a card in your name. But know that
things have changed from the days when every college freshman's dorm mailbox
overflowed with credit card offers and card issuers rained free pizza and T-shirts on students who applied.

In this post-Credit CARD Act era, most issuers are no longer clamoring to put a
credit card in the hands of every college student. Some no longer offer student
cards; others switched to pushing debit cards on campus.

Also know that when
you receive a credit card that's all yours -- one with no co-signers -- the
responsibility for handling the card wisely and repaying your debts falls
squarely on your shoulders.

3. Get the right credit card for you.

Once a student is able
to qualify for a regular card on his or her own, it's important to remember
that not all credit cards are the same, says Clarky Davis, former spokeswoman
for CareOne Credit Counseling, a debt relief service provider based in
Columbia, Md. and formally known as the "Debt Diva." Before a student
applies for a credit card, "He or she must do some research to find a card
with the most benefits -- a lower interest rate, no annual fees, reasonable
credit limits and clear billing policies."

If you think you might carry a
balance, go with a no-frills, low interest credit card. A reward credit card may sound cooler, but
the higher annual percentage rate (APR) and possible annual
fee won't be worth it.

Sullivan says some
students should consider starting out with a retail card. Retail cards come
with fewer benefits and lower spending limits, Davis says, but using this card
and paying the bill regularly will build good credit.

Davis says those who
can't qualify for a retail card will need a secured credit card, which is attached to a savings account. However, if the student
pays the bill responsibly and on time, he or she will eventually qualify for a
regular credit card. That includes student credit cards (here is our list of the best student credit cards), products that are directly aimed at consumers
who may lack significant borrowing history.

“A credit card is a valuable financial tool. However, students must be able to manage their credit card responsibly to benefit from using the tool.”

4. Use the credit card for occasional, small purchases.

Since responsible card
use and on-time repayments will help you build a good credit history, while also discouraging the bank from closing your account due
to inactivity, don't just leave that plastic sitting in your wallet.

"Getting a credit card means you start a credit history and shows on your credit report that you have one account
and no late payments," Sullivan says. "But if you really want to
start credit, you have to use the card."

One way to do that?
Consider putting small, recurring charges on your card: Think of regular
expenses, such as groceries or website subscriptions (such as Netflix), that
you won't have trouble repaying at the end of the month.

5. Avoid big-ticket buys, except in case of emergency.

"A credit card is a
valuable financial tool. However, students must be able to manage their credit
card responsibly to benefit from using the tool," Davis says.

Keeping your debt levels
low will ensure that if there is an emergency expense, you'll still have plenty
of your credit line accessible. That way, if your tire
blows out or your cell phone falls in the toilet, you can purchase a
replacement without exceeding your credit limit.

6. Pay off your balance each month.

When you are first
building good credit, do your best not to carry a balance on the card. Use the
card only for purchases you can afford, and pay off the balance at the end of
each month. What if you can't? You are living beyond your means and shouldn't
be making those purchases.

"A student should only have a credit card if he
or she has a job or some sort of income to support this financial tool,"
Davis says. If you carry a balance, you will owe interest fees. Why pay a fee
if you don't have to?

7. Pay all your other bills on time.

Think only your credit
card affects your credit? That's how it used to be, says Sullivan, but
"right now, there are a lot of folks, including credit bureaus, who are developing
alternative credit scores for no-file people, which includes lots of young
people.

Video: 4 ways students can build credit

They're giving some credibility to utility payments." One of the three
major U.S. credit bureaus, Experian, collects and lists rental payments on its
credit reports. However, it's still a relatively new phenomenon, and most
landlords don't yet report to the bureaus.

Sullivan says other
dues, such as taxes and library fees, can make a difference, too. He has seen students whose credit
has been ruined because they failed to pay a traffic fine. Davis agrees:
"Paying all your bills -- from apartment rent to your Internet
service -- consistently and on time is essential."

8. Don't co-sign for your friends.

Just like you may need
an adult co-signer to get approved for a card, your under-21 friends will, too.
To help them get approved for a card, some of these friends may approach you to
become a joint account holder. "I have found that some students are
getting older students (fraternity brothers, etc.) to co-sign. That is quite
dangerous," Sullivan says in an email.

Consumer experts have a tip for
you: Don't. That's because when a friend slips up -- by taking on too much debt
or missing payments to the bank -- the co-signer can quickly see their own
credit ruined.

"You not only become liable for everything charged if your
friend decides not to pay, but it could blemish your own credit record," says Edgar Dworsky, founder of
the website ConsumerWorld.org.

Making your friend an
authorized user also poses risks. Once again, their mistakes can hurt your
credit, although -- unlike when you co-sign on a card -- an authrorized user
can be easily removed from the account.

9. Do not apply for several credit cards at one time.

Now that you have
credit in your own name, don't go wild. If you apply for too much credit in too
short a period of time, your credit score will fall. If you have built up
strong credit over several years, it will hurt you less, "but if you have
barely established credit and apply for multiple cards, it can lower your
credit score significantly," Sullivan says.

One credit card should be
enough for most college students, he says. How many cards should you have?
"To prevent excessive credit card debt, it's better for consumers to have
as few credit cards as possible. Having just one card is ideal for most
students," Davis says.

10. Use student loans for education expenses only, and pay on time.

"Students should
view their student loan as a great way to cultivate important habits that will
help them build and maintain good credit," Davis says. If you use them
correctly, that is.

Sullivan says he sees a lot of young people take out
student loans to buy cars and other noneducation items. "Manage your loans
by only borrowing what you need to go to school -- that keeps the balance
down," Sullivan says. "When you get out of school, be prepared to
consolidate when appropriate."

Davis and Sullivan agree
that the real key to keeping your loans healthy is to make at least the minimum
payment every month and do it on time. Davis recommends paying more than the
minimum to pay the loan off faster, and emphasizes that payments should be
received by the creditor on or before the due date on the statement to keep the
account in good standing.

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CreditCards.com is an independent, advertising-supported comparison service. The offers that appear on this site are from companies from which CreditCards.com receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within listing categories. Other factors, such as our own proprietary website rules and the likelihood of applicants' credit approval also impact how and where products appear on this site. CreditCards.com does not include the entire universe of available financial or credit offers.